Soaring lumber prices add to the cost of a new home • Hacker News Board

Re: Soaring lumber prices add to the cost of a new home

#121

Post by ImprovedSilence » Fri, Apr 30, 2021, 11:49 PM UTC

diydsp wrote: post #63

teoruiz wrote: post #59

Honest question: why are houses in the US primarily built with wood? Is it just because it’s cheaper? Even if it’s cheaper, is it worth to have a cheaper but obviously less durable building when compared to brick and mortar? It’s always been baffling for my southern European mind.

For my gf (in the usa), it's aesthetics. Though I look at brick and think "longevity." Perhaps historically it was cheaper/easier to use local wood and that image stuck with people?

Nothing is built with brick anymore. If you see a newer than 1940s brick house, its a stick frame (wood) with a layer of brick outside it for aesthetics. Also people associate brick with longevity, but as several of my friends in old ass brick row homes, their foundations are crumbling, and are usually in need of serious structural repair. Brick isnt bomb proof like people think it is. Its even more susceptible to long term stress from wind shear.

Re: Soaring lumber prices add to the cost of a new home

#122

Post by jgalt212 » Sat, May 01, 2021, 12:03 AM UTC

nradov wrote: post #16

andrewmcwatters wrote: post #4

I don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!). I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality t…

Median incomes are irrelevant to housing developers. All that they care about is whether there are enough customers to buy their products. The developers typically don't lend to customers so the only risk is that demand might collapse in the middle of a project. A lot of small developers went bankrupt during the last recession because they had borrowed to build new projects and then couldn't sell the completed homes.…

> Median incomes are irrelevant to housing developers.

That's a bunch of horse hooey, as the customers in all housing markets (outside of a few global cities) are all local. Median income + credit conditions = how much buyers can afford.

> The federal government wouldn't really be able to prevent REITs from buying up homes.

Of course not, but no matter what kind of black magic Blackstone is weaving, they cannot get a more than a trivial number of people to rent a 3BR apt for $10K / month (approx price for nice 3BR in Manhattan). Once again, the population's median income is the driver.

Re: Soaring lumber prices add to the cost of a new home

#123

Post by busterarm » Sat, May 01, 2021, 12:18 AM UTC

ineedasername wrote: post #120

busterarm wrote: post #115

Earlier quoted context omitted.

Home ownership is more than just the cost of your mortgage. And in many markets, especially in big expensive cities like NY & SF, it costs more money to buy than to rent.

Precisely, which is why the "don't buy a home more than 2x annual salary" doesn't seem like a good rule: there are too many variables. Where I am, total cost of ownership for a small two bedroom house is generally slightly less than the cost of 2 bedroom apartment that is also smaller, and comes with the benefit of building equity. A clear advantage (in my mind) if you're going to stay there for a few years because y…

It's not even my rule. The 2x rule is older than shit...Just as time has gone up people are stretching it to 2.5x and 3x.

Another rule you can go with is the Rule of 28 if you prefer. These guidelines exist for a reason. Ignore at your own peril.

Lenders look at these things when considering giving you money. Using more leverage usually gives the bank a better deal than you.

Re: Soaring lumber prices add to the cost of a new home

#124

Post by dragonwriter » Sat, May 01, 2021, 12:22 AM UTC

busterarm wrote: post #123

ineedasername wrote: post #120

Earlier quoted context omitted.

Precisely, which is why the "don't buy a home more than 2x annual salary" doesn't seem like a good rule: there are too many variables. Where I am, total cost of ownership for a small two bedroom house is generally slightly less than the cost of 2 bedroom apartment that is also smaller, and comes with the benefit of building equity. A clear advantage (in my mind) if you're going to stay there for a few years because y…

It's not even my rule. The 2x rule is older than shit...Just as time has gone up people are stretching it to 2.5x and 3x. Another rule you can go with is the Rule of 28 if you prefer. These guidelines exist for a reason. Ignore at your own peril. Lenders look at these things when considering giving you money. Using more leverage usually gives the bank a better deal than you.

> These guidelines exist for a reason.

They exist because of the economic context at the time and place that they were generated, which may not have been valid for much more than that immediate context.

If you can find and examine the mathematical assumptions about cost and risk that justify the rule of thumb against current conditions, then you can make an informed evaluation of whether or not it applies to the current situation. If you can’t, like folk remedies, the advice is as likely to harmful as helpful in your actual concrete circumstances.

Re: Soaring lumber prices add to the cost of a new home

#125

Post by mlac » Sat, May 01, 2021, 1:13 AM UTC

gnopgnip wrote: post #23

andrewmcwatters wrote: post #4

I don't know what the risk calculus is for these home developers, but I do know that in particular areas of the US, you just straight up cannot afford a home anymore on median income (or even the top 20%ers looking for fair pricing!). I anticipate that mortgages will continue to push past 30 years into a strange 45-year+ territory, and we'll begin to see Japan-like multi-generational mortgages. Actually, in reality t…

High prices in some areas is about the price of land and not about construction prices. Residential REITs need to profit when they buy a house. An individiual homeowner doesn't, they can pay more if they want to. And individual homeowners get subsidized loans, and in many states subsidized property taxes, they can have a much lower monthly payment, and afford to offer a higher sale price. So for move in ready homes,…

Private Equity funds are using homes as a store of funds - to diversify their holdings and as a long term move. This can be in cash or financed, but they can afford to eat the loss because there is excess capital right now. It's been this purchasing for years that is contributing to the crunch right now.

From an article in September: "Blackstone Group, which blazed a trail for Wall Street in 2012 when it formed Invitation Homes and became the largest owner of single-family rental homes in America, has returned to a familiar watering hole." [1]

It's another way to milk the middle class.

[1] https://www.housingwire.com/articles/blackstone-gets-back-in...

Re: Soaring lumber prices add to the cost of a new home

#126

Post by derekp7 » Sat, May 01, 2021, 1:23 AM UTC

lightelement wrote: post #99

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Does inflation punish the poor more? It punishes people with savings, and people with savings are generally not poor. Inflation also helps anyone with a loan (because that loan just got "smaller"), and people with a lot of debt are generally poor as well.

It does punish them because minimum wage isn't indexed to inflation.

Re: Soaring lumber prices add to the cost of a new home

#127

Post by mlac » Sat, May 01, 2021, 1:23 AM UTC

DavidPeiffer wrote: post #64

andrewmcwatters wrote: post #51

Earlier quoted context omitted.

People have different definitions of "affordable." To me, a gross $65,000 household income, less after taxes, is not enough to be able to afford a home within that price range. It's probably closer to below $275,000. I do agree with you regarding location, though.

Completely agree. A lender in Iowa told us they approve up to 35% of gross income. Not certain if that was total servicing all debts, or their limit on the mortgage percentage payment. 65k could buy a ~300k house at a 3.25% interest rate. I talked with an attorney from San Francisco on a plane once. When they bought their first house, 70% of their income was going towards the house. Raises helped that become a more r…

That works until the bubble pops, and then really only for for families with high incomes. In your example, let's assume its 70% of take-home (it has to be after tax, or they would literally have nothing left). Taking home 300K, it's easy to live off of 90K. Taking home 100K, it's harder to live on 30K a year. Taking home 65 and doing that, it's not going to happen.

The cost of most household consumables is largely fixed, even as income scales. One can have expensive taste and increase that, but you can only spend so much on toilet paper and laundry detergent.

Re: Soaring lumber prices add to the cost of a new home

#128

Post by x3sphere » Sat, May 01, 2021, 1:36 AM UTC

lightelement wrote: post #99

adrr wrote: post #30

Has anyone looked at the cost of food or gas lately? Interest rates need to go up. It is beyond stupid that I was able to refinance my house at 1.75% on 15 year loan in December. My previous loan was 4% on a 30 which already was extremely low. It’s giving people free money who don’t need it. Side effect is the inflation that punishes the poor even more.

Does inflation punish the poor more? It punishes people with savings, and people with savings are generally not poor. Inflation also helps anyone with a loan (because that loan just got "smaller"), and people with a lot of debt are generally poor as well.

Right now I'd say probably the middle class it hurts the most. They would have more cash savings.

High net worth individuals it would hurt less as they usually have way more in assets such as stocks. But in the middle class, their stock exposure is often limited to their 401k or retirement plan.

I know quite a few people who had a downpayment in cash waiting to buy a house before this all started and are still looking. That value of cash went down quite a lot over the past year. Houses are up 40-50% YOY in some cases here (Arizona).

If wages don't go up though, this will also hurt the poor significantly.

Re: Soaring lumber prices add to the cost of a new home

#129

Post by x3sphere » Sat, May 01, 2021, 1:58 AM UTC

smabie wrote: post #75

ttul wrote: post #15

Gen-X: "We've got all this extra cash because we couldn't fly anywhere or go on cruises. Let's build our dream home in the mountains." Boomer: "Well, the 401-K is up a ton. Can't seem to spend the cash pouring out. Let's upgrade the house and buy a second home somewhere nice." Millenial: "We still have no savings because rent is insane and incomes have not kept up with inflation for decades as capital has played a la…

While not representative, I would imagine that for most millennial HN users, 2020 was their best year in terms of financial gain: roaring stock market, wfh and CoL savings, insane crypto boom, record level bonuses, etc. I do understand that it isn't a representative picture, but among my friends, none of us have ever done so well financially in our entire lives.

It's been a K shaped recovery. Certainly a lot of people have benefitted and did even better than past years despite the pandemic, but for a lot of others they haven't.

Been great for me as well but outside of people in tech, I don't know too many in crypto as they didn't have the funds to risk in the first place. Nor do they have much stock exposure outside of their 401k.

Re: Soaring lumber prices add to the cost of a new home

#130

Post by croutonwagon » Sat, May 01, 2021, 1:59 AM UTC

maxerickson wrote: post #93

croutonwagon wrote: post #83

Earlier quoted context omitted.

The Federal government has a TON of subsidies for first time buyes and even more for veterans. The issue is part land scarcity driving up the cost of land and part the transition of our economy out of production and into consumerism. Building has never been cheaper, and even quality has improved, including working through some pretty bad materials changes (like PEX plumbing, or chinese drywall). We no longer really d…

I am under the impression that the change to PEX was good? It sure was adopted fast. Do you mean it was a significant change?

There’s been a number of lawsuits involving PEX over the years. Namely defects etc that are failure prone and once installed is a nightmare to repair/replace. And once failed is equally costly to fix.